Current issues in Company Law and CG

Shifting political currents and the financial and economic crisis have created conflicting pressures on the area of European corporate governance and company law, which is reflected in current debates. On the one hand, supporters of 'negative integration' and greater competition between national regimes of company law are pushing to complete an agenda which was initiated with the Commission’s 2003 ‘Action Plan on the modernisation of company law and the improvement of corporate governance’. On the other hand, there are widespread demands for stronger regulation of corporate governance at the European level in the interests of sustainable companies and the realization of Social Europe.

Current debates in this area include consultations on the future direction of European corporate governance and company law, as well as a discussion on the need for a European minimum standard for worker involvement. Furthermore, there are specific discussions and proposals in the areas of reporting by companies of social and environmental information, the cross-border transfer of registered seats (proposed 14th company law directive), and on new European company legal forms (the European Private Company and the European Foundation).

In recent years the issue of corporate governance has become a highly politicized policy area with great relevance for employees and society as a whole. At stake is the issue of who runs our companies and what strategies and goals these companies pursue. Since the 1990s corporate governance reform in Europe has been dominated by the ‘shareholder value’ model of the firm, which prioritizes the interests of shareholders. However, in the wake of the financial crisis, increasing dissatisfaction with this model is leading to the search for an alternative which gives stakeholders a stronger ‘voice’ in company affairs and focuses on long-term sustainability.

In the wake of the financial crisis and, with the appointment of a new European Commission in 2010, a debate has been launched on the future direction that EU company law and corporate governance should take. At stake is the question of whether an agenda of increasing competition between national regimes will be continued, or whether efforts will be made to build a framework in which employees and other stakeholders have more 'voice' within the company and sustainable company strategies are supported.

Each time proposals for legislation creating company forms at the European level or for regulating cross-border company restructuring are made, the issue of worker involvement is raised. Significantly different provisions for information, consultation and participation rights for employees are contained in the legislation proposed or already passed. The European trade union movement has therefore raised the demand of creating a European minimum standard for worker involvement, which would apply to all European company legal forms and to cross-border restructurings regulated at the European level.

The triple (environmental, social and governance) crisis has lent new urgency to the debate on requirements for companies to extend their reporting beyond financial aspects to include their environmental and social impacts. The current system of non-financial reporting, which (with some exceptions) is based on voluntary disclosure in sustainability or corporate responsibility reports, does not allow for an adequate comparison of social and environmental performance across companies or within companies over time. A broad coalition of trade unions, NGOs and experts have therefore raised the demand for the implementation of mandatory standards for non-financial reporting by companies.